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In PPACA World, what counts as real coverage?

By Allison Bell

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Which health insurance products are solid enough to count as “minimum essential coverage” (MEC), and which are narrow enough to escape from the Patient Protection and Affordable Care Act (PPACA) major medical coverage mandates?

Officials at the Center for Consumer Information & Insurance Oversight (CCIIO) have looked at those questions in two new batches of guidance.

CCIIO is an arm of the Centers for Medicare & Medicaid Services (CMS), which, in turn, is an arm of the U.S. Department of Health and Human Services (HHS). CCIIO is in charge of HHS efforts to implement the PPACA provisions that affect the commercial health insurance market.

Kevin Counihan, director of CCIIO, talks about the definition of MEC in an explanation of how HHS will handle applications from insurers, plan sponsors and other entities that want to get HHS to classify certain types of coverage as MEC. The HHS approach could affect whether taxpayers with new or unusual types of health coverage can use the coverage to meet the PPACA individual health insurance coverage mandate.

Officials talk about the definition of “excepted benefits,” or health insurance products that fall outside the scope of major medical insurance mandates in PPACA and the Health Insurance Portability and Accountability Act of 1996 (HIPAA), in a new set of answers to frequently asked questions (FAQs) about PPACA. That could affect how much certain supplemental products cost or whether continuing to sell them is still possible.

For a look at what may be in the glossaries that shape how PPACA World works, read on.

Broccoli

1. The MEC evaluation process guidance

Section 5000A of the Internal Revenue Code (IRC), a provision added by PPACA, is set to require many consumers who failed to have MEC throughout 2014 to pay a penalty. For most consumers who earn enough to pay the penalty and are unable to get an exemption, the 2014 penalty will equal 1 percent of income. The penalty is set to rise to 2 percent of income for 2015 coverage.

When PPACA opponents were fighting the mandate in the courts from 2010 through 2012, some of the opponents, and some of the judges, compared the MEC mandate to a requirement for consumers to buy broccoli.

PPACA has directly defined many types of health coverage, such as individual major medical policies that meet PPACA standards, as MEC.

HHS has issued regulations classifying other types of coverage, such as Medicare Advantage plans and refugee medical assistance from the Administration for Children and Families, as MEC.

In October 2013, CMS officials said other types of coverage that comply with “substantially all” PPACA requirements could go through an administrative process to qualify as MEC.

See also: HHS creates minimum essential coverage wiggle room

The new guidance simply explains the MEC application review process, Counihan writes in the guidance.

He says a plan will be more likely to qualify as MEC if:

  • It’s a small, transitional plan, such as a temporary plan for people in a closed enrollment block.

  • It provides better coverage for the enrollees than a private exchange plan would.

  • It covers people outside the United States.

If HHS rejects an application for MEC status, the plan will have 15 days to file an appeal with HHS.

Open highway

2. The excepted benefits FAQs

Traditionally, the excepted benefits rules have applied to products such as critical illness insurance, dental insurance and hospital indemnity insurance.

Insurers want to create new types of supplemental products, such as new types of hospital insurance, that will help fill in gaps in PPACA-compliant major medical coverage, or may serve as an alternative to major medical coverage for the people still unable or unwilling to get major medical coverage.

Federal regulators want to keep insurers from using excepted benefits provisions to create products that might end up serving as alternatives to major medical coverage.

See also: Feds unveil medical wrap plan regs

In the new FAQ answers, officials say federal regulators are thinking of closing one possible loophole by proposing regulations that would prohibit an excepted benefit product sold in a state from covering any benefit that is classified as an essential health benefit (EHB) in that state.

The PPACA EHB rules classify hospitalization benefits as EHBs, and it looks as if the FAQ answer could apply to group hospitalization supplemental insurance. 

The regulation would not affect dental insurance, disability insurance or other products that already qualify as something other than a supplemental excepted benefit, officials say.

For now, federal regulators will hold off on going after issuers of a supplemental excepted benefit product if it provides coverage for some benefits other than PPACA essential health benefits as well as for PPACA essential health benefits, officials say.